part 2:
XLE isn't the only one benefiting from support at former resistance. The PHLX Oil Services Sector Index (OSX: sentiment, chart, options) has ramped higher along the support of its 40-week moving average since December 2003, and, thanks to a rebound off its March high near 145, has hit an all-time high in today's session. The CBOE Oil Index (OIX: sentiment, chart, options) has enjoyed a similar advance as it keys on round-number support at the 500 level.
Digging around the sector's sentiment backdrop, I'm seeing a preponderance of pessimism among traders. Options speculators are grabbing up positions, particularly on the XLE. Peak put open interest in the August series rests at the out-of-the-money 45 strike, with around 45,000 contracts. Contrast that with peak front-month call open interest (also at 45 strike) with only 8,300 contracts. The September configuration is similar with nearly 57,000 puts at the 45 strike. This hefty accumulation of bearish bets could serve as a layer of potential options-related support for this region. |
